Introduction | p. 1 |
Economic and Accounting Rates and Concepts Should Not be Conflated | |
Economic vs. Accounting Profit Rates | p. 7 |
Overview and Critique of Existing Transfer Pricing Methods | p. 11 |
Comparable Profits Method and TNMM | p. 11 |
Description of CPM and TNMM | p. 12 |
Circumstances when CPM and TNMM Are Applied | p. 14 |
Underlying Economic Rationale | p. 14 |
Critique of Economic Reasoning | p. 15 |
Summary and Practical Implications | p. 17 |
Resale Price and Cost Plus Methods | p. 17 |
Circumstances when Resale Price and Cost Plus Methods Apply | p. 18 |
Description of Resale Price and Cost Plus Methods | p. 19 |
Underlying Economic Rationale | p. 19 |
Critique of Economic Reasoning | p. 20 |
Summary and Practical Implications | p. 21 |
Comparable Uncontrolled Price Method | p. 22 |
Description of Comparable Uncontrolled Price Method | p. 22 |
Underlying Economic Rationale | p. 23 |
Critique of Economic Reasoning | p. 23 |
Summary and Practical Implications | p. 26 |
Services Cost Method | p. 26 |
Description of Services Cost Method | p. 27 |
Rationale for Services Cost Method | p. 28 |
Profit Split Methods | p. 29 |
Residual Profit Split Method | p. 29 |
Comparable Profit Split Method | p. 31 |
Summary and Practical Implications | p. 32 |
Proposed Cost-Sharing Regulations and Coordinated Issue Paper | p. 32 |
Income Method | p. 35 |
Acquisition Price Method | p. 36 |
Martet Capitalization Method | p. 36 |
Critique | p. 37 |
Global Dealing Regulations and Notice 94-40 | p. 41 |
Circumstances in Which the Proposed Global Dealing Regulations and Notice 94-40 Apply | p. 41 |
Description of Notice 94-40 and Proposed Global Dealing Regulations | p. 43 |
Underlying Economic Rationale | p. 45 |
Critique of Formulary Method | p. 45 |
Summary and Practical Implications | p. 48 |
Alternative and Supplementary Approaches to Transfer Pricing | |
Some Alternative Approaches to Transfer Pricing | p. 51 |
Modified Comparable Uncontrolled Price Method | p. 53 |
Numerical Standards | p. 54 |
Required Return on Debt and Equity Capital | p. 55 |
Required Return on Equity | p. 56 |
Cost of Debt | p. 60 |
Non-Cash Charges and Investment | p. 61 |
Data Requirements | p. 61 |
Summary | p. 61 |
Joint Venture-Based Profit Split | p. 62 |
Financial or Tangible Asset-Based Profit Split | p. 63 |
Franchise Model | p. 63 |
Summary | p. 64 |
Caw Studies | |
Intercompany Sale of Diamonds | p. 67 |
Summary of Key Facts | p. 68 |
Historical Dominance of De Beers | p. 68 |
The Decline of De Beers' Role and the Emergence of Parallel Primary Markets | p. 69 |
Producers' and Sightholders' Branding and Design Development Initiatives | p. 72 |
Pricing Dynamics: Primary, Secondary and Retail Markets | p. 75 |
Functional Analysis of FP, IS and USS | p. 77 |
Transfer Pricing Issues | p. 79 |
Analysis Under Existing Regime | p. 79 |
FP's Intercompany Sales of Rough Stones to IS | p. 80 |
IS' Sales of Generic Polished Stones to USS | p. 81 |
IS' Pricing of Proprietary Polished Stones Sold to USS | p. 85 |
Analysis Under Alternative Regime | p. 85 |
FP's Intercompany Sales of Rough Stones to IS | p. 85 |
IS' Sales of Non-Proprietary Polished Stones to USS | p. 86 |
Comparison | p. 88 |
Intercompany Sale of Medical Devices | p. 89 |
Summary of Key Facts | p. 89 |
Business Unit A: In-Hospital Monitoring Systems | p. 90 |
Business Unit B: Outpatient Monitoring Devices | p. 91 |
Transfer Pricing Issues | p. 93 |
Analysis Under Existing Regime | p. 93 |
FS' Sales of Tangible Property to USP | p. 93 |
USP's Sales of Tangible Property to FS | p. 95 |
Analysis Under Alternative Regime | p. 98 |
Comparison | p. 99 |
Performance of Intercompany Services | p. 101 |
Summary of Key Facts | p. 102 |
Transfer Pricing Issues | p. 104 |
Value of Customer Relationships | p. 104 |
Declining Average Prices | p. 106 |
Rapid Rates of Technological Change | p. 108 |
Established Customer Relationships | p. 109 |
Analysis Under Existing Regime | p. 110 |
Application of Best Method Rule | p. 110 |
Application of Selected Method: CRM Services | p. 111 |
Application of Selected Method: R&D Services | p. 112 |
Analysis Under Alternative Regime | p. 113 |
Comparison | p. 114 |
Replication of Internet-Based Business Model | p. 115 |
Summary of Key Facts | p. 115 |
USP: Business Development Group | p. 116 |
USP: Account Management Group | p. 116 |
USP: Marketing Group | p. 117 |
USP: Information Technology Group | p. 117 |
USP: Customer Service | p. 117 |
USP: Legal | p. 118 |
USP: Finance, Tax, Internal Audit and Back-Office | p. 118 |
FS | p. 118 |
Transfer Pricing Issues | p. 118 |
Analysis Under Existing Regime | p. 119 |
Analysis Under Alternative Regime | p. 120 |
Conclusions | p. 123 |
Sale of Assets with Embedded Intellectual Property | p. 125 |
Summary of Key Facts | p. 125 |
Transfer Pricing Issues | p. 129 |
Analysis Under Existing Regime | p. 129 |
Analysis Under Alternative Regime | p. 132 |
USS' Estimated Cost of Equity Capital | p. 133 |
Estimated Value of USS' Equity Capital | p. 133 |
Cost of Debt | p. 134 |
Required Return on Capital Assuming Statutory Tax Rate Applies | p. 134 |
Adjustments to Reflect Loss Carryforwards, Other Firm-Specific Factors | p. 135 |
Comparison | p. 135 |
Provision of CDN Services to Third Parties | p. 137 |
Summary of Key Facts | p. 137 |
Transfer Pricing Issues | p. 140 |
Analysis Under Existing Regime | p. 140 |
Analysis Under Alternative Regime | p. 141 |
Additional Analysis Under Alternative Regime | p. 143 |
Comparison | p. 144 |
Global Trading of Commodities | p. 145 |
Summary of Key Facts | p. 145 |
Description of Natural Gas Markets | p. 145 |
Description of Alumina and Aluminum Markets | p. 147 |
Core Assets and Skills | p. 148 |
Recent Developments and Their Effect on the Relative Importance of Core Assets and Skills | p. 151 |
Effects of Developments on Trading Activities | p. 153 |
Division of Labor and Risks Among Group Members | p. 154 |
Transfer Pricing Issues | p. 155 |
Analysis Under Existing Regime | p. 155 |
Analysis Under Alternative Regime | p. 156 |
Comparison | p. 160 |
Decentralized Ownership of Intellectual Property | p. 161 |
Summary of Key Facts | p. 162 |
Transfer Pricing Issues | p. 164 |
Analysis Under Existing Regime | p. 165 |
Assuming USP and FS Act to Maximize Their Individual Profits | p. 165 |
Assuming FS and USP Art as Joint Venture Partners | p. 166 |
Analysis Under Alternative Regime | p. 171 |
Key Terms of JV Agreements | p. 172 |
Summary of Qualitative Observations | p. 173 |
Quantitative Analysis | p. 174 |
Analysis Under 2005 Proposed Cost-Sharing Regulations | p. 175 |
Income Method | p. 176 |
Market Capitalization Method | p. 179 |
Comparison | p. 179 |
Conclusions | |
Concluding Observations | p. 183 |
Index | p. 187 |
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